Merchandise 8.01. Different Occasions.
On December 3, 2021, the board of administrators of Laureate Schooling, Inc. (the
“Firm”) accepted, pursuant to the beforehand introduced adoption of a plan of
partial liquidation (the “Plan”) associated to the distribution of web proceeds
from the Firm’s sale of Walden e-Studying LLC (the “Sale”), the cost of a
particular money distribution (the “Distribution”) equal to $0.58 per every share of
the Firm’s Frequent Inventory, par worth $0.004 per share, to every holder of file
on December 14, 2021. The Distribution is scheduled to be paid on December 28,
2021. Primarily based on the present variety of shares excellent, the mixture quantity of
the Distribution is predicted to be roughly $105 million.
The proceeds being distributed are primarily attributable to the discharge of money
collateral associated to regulatory obligations related to actions of the
divested enterprise. Gross proceeds nonetheless remaining to be acquired from the Sale
embody as much as $74 million held in escrow. In accordance with the Plan, upon
launch of escrow quantities, the Firm intends to distribute to stockholders
such remaining web proceeds within the type of a remaining particular distribution earlier than
the top of calendar yr 2022.
In reference to the Distribution, the Board accepted sure required
changes below the Firm’s fairness award compensation plans. Topic to the
cost of the Distribution, the train worth of the Firm’s choices will probably be
lowered by $0.58 per share, and holders of restricted and efficiency inventory
items will obtain an quantity in money equal to $0.58 per unvested inventory unit held
payable when such unit vests. If all excellent inventory items vest, the mixture
quantity to be paid in respect of the items will probably be roughly $580,000.
On December 3, 2021, the Firm issued a press launch concerning the
Distribution. A duplicate of this press launch is furnished herewith as Exhibit
99.1.
Abstract of Materials U.S. Federal Earnings Tax Penalties to the Receipt of the
Distribution
The Distribution will probably be taxable to holders of Firm frequent inventory. The Firm
will deal with the Distribution as a partial liquidation for federal revenue tax
functions because the Firm obtained a non-public letter ruling from the Inside
Income Service that, in abstract, gives that the Distribution will probably be handled
as a distribution in partial liquidation. In consequence, every holder of Firm
frequent inventory that isn’t a company (for this goal any inventory held by a
partnership, property or belief will probably be handled as if it had been really held
proportionately by its companions or beneficiaries) (a non-corporate shareholder)
will probably be handled as having a portion of their Firm frequent shares redeemed and
will acknowledge achieve or loss equal to the distinction between the money acquired by
them within the Distribution and their adjusted tax foundation within the Firm frequent
inventory deemed to have been exchanged therefor. Every company shareholder
usually will probably be required to deal with the Distribution as a dividend for federal
revenue tax functions to the extent of the Firm’s present and collected
earnings and income (as decided for federal revenue tax functions).
All holders of Firm frequent inventory ought to seek the advice of their very own tax advisors to
decide the actual tax penalties to them of the Distribution, together with
the applicability and impact of any U.S. federal, state, native, non-U.S. and
different tax legal guidelines.
For a extra detailed dialogue of the federal revenue tax penalties of the
Distribution, see “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO THE RECEIPT
OF THE DISTRIBUTION.”
Materials U.S. Federal Earnings Tax Penalties to the Receipt of the Distribution
The next dialogue summarizes the U.S. federal revenue tax penalties of
the Distribution to U.S. holders and non-U.S. holders (every as outlined under).
This dialogue is restricted to U.S. holders and non-U.S. holders who maintain their
shares of Firm frequent inventory as a “capital asset” throughout the that means of
Part 1221 of the Code (usually, property held for funding). This
dialogue is predicated on the Code, relevant Treasury laws, judicial
interpretations thereof and administrative rulings and observe, all as in
impact as of the date
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hereof, and all of that are topic to vary or differing interpretations,
probably with retroactive impact. Any such change or interpretation may have an effect on
the accuracy of the statements and conclusions set forth herein.
This dialogue doesn’t purport to handle all features of U.S. federal revenue
taxation which may be related to explicit holders of shares of Firm frequent
inventory in mild of their explicit information and circumstances, nor does it apply to
holders of shares of Firm frequent inventory which can be topic to particular guidelines
below the U.S. federal revenue tax legal guidelines together with, for instance, banks or different
monetary establishments, insurance coverage corporations, regulated funding corporations,
actual property funding trusts, mutual funds, sellers in securities or
currencies, merchants in securities that elect to use a mark-to-market technique of
accounting, tax-exempt entities, entities or preparations handled as
partnerships for U.S. federal revenue tax functions or different flow-through entities
(and buyers therein), subchapter S firms, retirement plans, particular person
retirement accounts or different tax-deferred accounts, holders answerable for the
various minimal tax, U.S. holders having a “purposeful forex” apart from
the U.S. greenback, managed international firms, passive international funding
corporations, holders who maintain shares of Firm frequent inventory as a part of a
straddle, constructive sale, conversion transaction or different built-in or danger
discount transaction, holders required to speed up the popularity of any
merchandise of gross revenue because of such revenue being acknowledged on an
relevant monetary assertion, holders that truly or constructively maintain 5%
or extra of the shares of Firm frequent inventory, and holders who acquired their
shares of Firm frequent inventory by the train of an worker inventory choice
or in any other case as compensation or by a retirement plan. Moreover, this
dialogue doesn’t tackle any U.S. federal tax concerns apart from U.S.
federal revenue tax concerns, such because the Medicare tax on sure
funding revenue, property or reward taxation, or tax concerns arising below
the tax legal guidelines of any state, locality or non-U.S. jurisdiction.
For functions of this dialogue, the time period “U.S. holder” means a useful proprietor
of shares of Firm frequent inventory that, for U.S. federal revenue tax functions,
is:
• a person who’s a citizen or resident of america;
• a company created or organized in or below the legal guidelines of america,
any state thereof, or the District of Columbia;
• an property the revenue of which is topic to U.S. federal revenue tax
no matter its supply; or
• a belief (a) that’s topic to the first supervision of a court docket throughout the
United States and the entire substantial choices of that are managed by
a number of U.S. individuals or (b) that has a legitimate election in impact below
relevant Treasury laws to be handled as a U.S. particular person for U.S.
federal revenue tax functions.
As used herein, the time period “non-U.S. holder” means a useful proprietor of shares of
Firm frequent inventory that’s neither a U.S. holder nor a partnership (together with
any entity or association handled as a partnership for U.S. federal revenue tax
functions).
If a partnership (or an entity or association handled as a partnership for U.S.
federal revenue tax functions) holds shares of Firm frequent inventory, the tax
therapy of a accomplice in such partnership usually will rely upon the standing
of the accomplice and the actions of the partnership. Companions of partnerships
holding Firm frequent inventory ought to seek the advice of their very own tax advisors.
All holders of Firm frequent inventory ought to seek the advice of their very own tax advisors to
decide the actual tax penalties to them of the Distribution, together with
the applicability and impact of any U.S. federal, state, native, non-U.S. and
different tax legal guidelines.
Characterization of the Distribution as a Partial Liquidation
The Distribution is meant to be handled as a distribution in partial
liquidation of the Firm for U.S. federal revenue tax functions that’s handled,
within the case of a person (i.e., non-corporate) shareholder, as a sale or
alternate of a portion of such particular person’s frequent inventory moderately than as a
distribution probably handled as a dividend. The Firm has obtained a non-public
letter ruling (the “Ruling”) from the Inside Income Service
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(“IRS”) that, in abstract, gives that the Distribution will probably be handled as a
distribution in partial liquidation of the Firm for U.S. federal revenue tax
functions giving rise to the U.S. federal revenue tax penalties summarized
under.
Pursuant to the Ruling, the Distribution will probably be handled as a distribution in
partial liquidation of the Firm, and thus, capital achieve or loss, as
relevant, will probably be acknowledged by every of the Firm’s non-corporate U.S.
holders to the extent of the distinction between the quantity distributed within the
partial liquidation and the adjusted tax foundation of the shares deemed surrendered
in alternate therefor. For the U.S. federal revenue tax penalties of the
receipt of a Distribution by U.S. holders which can be firms or non-U.S.
holders, respectively, see the sections entitled “U.S. Holders-Penalties of
Distribution to Non-Company U.S. Holders” and “Non-U.S. Holders” under.
The Ruling depends on sure information, representations and undertakings from the
Firm concerning the previous and future conduct of the Firm and its
subsidiaries. If, because of an IRS audit or in any other case, any of those information,
representations or undertakings are decided to be incorrect or not in any other case
glad, the Firm and its shareholders might not have the ability to depend on the
Ruling and might be topic to completely different tax penalties, together with probably
vital extra tax liabilities.
One of many a number of necessities for partial liquidation therapy is that the
distributing firm “redeem” its inventory in alternate for such distribution.
Curiosity holders within the Firm’s fairness linked compensation plan aren’t
receiving any partial liquidation proceeds. Within the Ruling, the IRS concluded
that the Distribution will probably be handled as in full cost in alternate for Firm
inventory deemed to have been redeemed offered the phrases of the Firm’s fairness
linked compensation plans are adjusted to get rid of the impact on the worth of
these equity-linked devices brought on by the Distribution, satisfying this
requirement. As described herein, changes had been accepted by the Board and
subsequently will probably be executed to get rid of the impact of the Distribution on the
worth of these devices.
One other of the a number of necessities for partial liquidation therapy is that
the “web” proceeds have to be distributed by December 31, 2022. Whereas the
Distribution represents a majority of the web proceeds, it doesn’t signify
the entire web proceeds. Though the Firm plans on distributing the entire
web proceeds earlier than December 31, 2022, if the Firm fails to take action, the
Distribution might not qualify for partial liquidation therapy.
The rest of this dialogue assumes that the Distribution will probably be handled
as a distribution in partial liquidation for U.S. federal revenue tax functions.
U.S. Federal Earnings Tax Remedy to U.S. Holders
Penalties of Distribution to Non-Company U.S. Holders
Every particular person (i.e., non-corporate) U.S. holder of Firm frequent inventory will,
for U.S. federal revenue tax functions, deal with the Distribution because the sale of a
portion of such U.S. holder’s Firm frequent inventory. Accordingly, such U.S.
holder will acknowledge capital achieve or loss, as relevant, equal to the
distinction, if any, between the money acquired within the Distribution over the tax
foundation of the Firm frequent inventory that’s deemed surrendered. For this goal,
a shareholder will probably be deemed to have surrendered plenty of shares of Firm
frequent inventory equal in worth to the portion of the Distribution distributed to
such shareholder. To the extent that any such achieve is attributable to the sale
of Firm inventory held for greater than 12 months, it will likely be long-term capital achieve
presently topic to U.S. federal revenue tax at favorable charges. The
deductibility of capital losses is topic to limitations.
Penalties of Distribution to Company U.S. Holders
Company U.S. holders usually will probably be required to deal with the Distribution as a
distribution with respect to, moderately than in alternate for, inventory for U.S.
federal revenue tax functions. In consequence, the distribution will probably be handled as a
dividend for U.S. federal revenue tax functions to the extent of the Firm’s
present or collected earnings and
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income (as decided for U.S. federal revenue tax functions). To the extent that
the Distribution is handled as a dividend to a company U.S. holder, it
usually will probably be eligible for a dividends-received deduction (topic to
sure necessities and limitations). Nevertheless, such dividend will probably be topic to
the “extraordinary dividend” guidelines. Accordingly, such company shareholder
could be required to scale back its foundation in its Firm frequent inventory (however not under
zero) by the quantity of the untaxed portion of the extraordinary dividend. Any of
the untaxed portion of such extraordinary dividend that isn’t utilized to scale back
such company shareholder’s foundation in its Firm frequent inventory will probably be
acknowledged as capital achieve upon the sale or different disposition of such company
shareholder’s frequent inventory.
To the extent that quantities acquired pursuant to the Distribution which can be
handled as distributions exceed the Firm’s present and collected earnings
and income, the distribution will first be handled as a non-taxable return of
capital, inflicting a discount within the tax foundation of such U.S. holder’s shares, and
any quantities in extra of the U.S. holder’s tax foundation will end in capital
achieve.
Data Reporting and Backup Withholding
Normally, money acquired pursuant to the Distribution will probably be topic to backup
. . .
Merchandise 9.01. Monetary Statements and Displays.
(a) 99.1 Press Launch, dated December 3, 2021, of Laureate Schooling, Inc.
(b) 104 Cowl Web page Interactive Knowledge File (embedded throughout the Inline XBRL doc)
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